Who's in charge here?

Date published: Monday, 1 July, 2013

Empson: Who is in charge here?Senior Partner: (Pause) Well I suppose I am, I mean in a way, I mean I think, but it's difficult to answer that question.Empson: Who is in charge here?Managing Partner: Hmmm. You want one name or you want…?Empson: I just want your view of what the truth is.Managing Partner: (Pause) I think it's the two of us actually. We rarely disagree. It's instinctive.

Leaders, by definition, must have followers. At least, that is the conventional assumption. But in an organisation filled with highly educated, independent thinkers, who don't much like being told what to do, finding people who are happy to identify themselves as "followers" is not going to be easy. What, then, does leadership actually mean in this context and how is it possible to lead effectively?

Cass Business School's Professor Laura Empson has been looking at this issue in an innovative research study, funded by the Economic and Social Research Council of Great Britain, on leadership dynamics in professional service firms. She argues that, while leadership in the conventional sense may not be immediately apparent within a professional service firm, it does in fact permeate all aspects of professional work and all levels of the firm. However, it needs to be thought about rather differently from leadership in conventional hierarchical organisations.

Professional service firms (such as consulting, law and accounting firms) are traditionally structured as partnerships, or as corporations that mimic many of the characteristics of partnerships. Their distinctive leadership challenges are based on two, interrelated organisational features: firstly extensive individual autonomy, and secondly contingent managerial authority.

Leading by consensusExperienced professionals require, or at least expect, extensive individual autonomy. This autonomy is justified by the requirement for professionals to make choices about how best to apply their expertise as part of a customised professional service. The core value-creating resources of a professional service firm - the technical knowledge and client relationships - are often proprietary to specific professionals. This emphasis on individual autonomy is associated with contingent managerial authority. Professional service firms are often privately owned by the senior professionals who work within them.Professionals elect their peers to the most senior leadership positions and can depose any leaders who fail to retain their support. As a result the formal authority of senior executives in professional service firms is limited; they can only lead by consensus. A particular irony of professional firms is that accepting a leadership position potentially entails losing power. In organisations, power comes from controlling access to key resources. In a professional service firm the most valuable resources are specialist professional expertise and lucrative client relationships.An individual who takes on a major leadership role in a professional firm necessarily reduces their fee-earning work. By reducing their front line client work, they will struggle to maintain cutting-edge professional expertise. They risk exchanging their valuable assets for a title which brings with it very little formal authority and a great deal of responsibility.

Process of interactionAccording to Professor Empson, this means that leadership in a professional service firm needs to be conceptualised differently from conventional organisations. It needs to be understood as both processual and plural. In a professional service firm leadership is not necessarily something that an individual does or a quality that an individual possesses, but is a process of interaction among organisational members seeking to influence each other. This can be understood in terms of the concept of the Leadership Constellation (click link for image).Professor Empson argues that, in the context of a professional service firm, the members of the Leadership Constellation are:Senior Executive Dyad - typically a managing partner and senior partner, or chairman and chief executive.Heads of Businesses - leaders of major fee-earning areas such as specific practices, offices, and market-sector groupings.Heads of Business Services - responsible for support functions such as Finance and Human Resource Management.

Key Influencers - have power derived from control of key client relationships, valuable expertise or a strong internal and external reputation.Leadership is represented by the arrows that connect the members of the Leadership Constellation (i.e. the processes of influencing) as much as by the circles representing the leaders themselves.The research study is based on detailed empirical analysis, including more than 100 interviews, into the leadership dynamics in three elite professional service firms. The case study firms were drawn from the consulting, accounting, and legal sectors, and each firm was ranked in the top four within its respective sector. Data collection and analysis is ongoing but already some intriguing insights are emerging.

Hidden dynamics"What I found is complex, subtle and fascinating," said Professor Empson. "It is about the hidden power dynamics, about interpersonal processes, about longstanding loyalties and rivalries, the things that people never like to talk about or acknowledge to each other within a professional service firm."Focusing here on just one of the firms, the study identified a highly ambiguous authority structure, which is manifested in four ways.First, the roles of the Senior and Managing Partner are not defined. Second, the Board officially has oversight of the executive, but some of its members also perform executive roles. Third, each of the four major practice areas has two or three joint heads. Fourth, while the Partnership Agreement includes provision for an Executive Committee, this has never been established formally. Instead an informal 'management team' exists whose composition and role is fluid and ambiguous.

Resolving conflictAs one senior business services staff member explains: "I think why we have this confusion around the management team, who's in it and who's really important, is because we can't quite bring ourselves to say, 'actually you're small fry in the general scheme of things', because he's my partner, he is my equal, and so that's where we fudge things and we have lots of distribution lists and then things go wrong and there's an embarrassment and everybody gets a bit cross."The professionals can function effectively with this profoundly ambiguous authority structure because many have worked together for years and built up close working and personal relationships. As one interviewee explained: "There is a sort of gentlemanly approach to resolving conflict. There is a bit of 'let's not go there, we'll gradually sort it out and it will gradually get better'."But what happens when there is no time to gradually sort things out or wait for things to get better?The study found that, confronted with the fall-out of the global banking crisis, the Senior and Managing Partner at one of the firms realised that the partnership would need to shrink. However, they did not have any authority to ask partners to leave without a full vote of the partnership.The Senior and Managing Partner, together with six of their closest colleagues, decided to proceed with a partnership restructuring but to keep deliberations confined to a select group of senior executives within the firm. In the process a hidden hierarchy was revealed within the ambiguous authority structure - and the leadership constellation became manifest.

Partnership restructuringSelected Practice Heads began the process of identifying which partners should be asked to leave or accept a reduction in their equity. Over a five-month period they repeatedly cycled through a process of analysing, challenging, recommending and rejecting each other's recommendations. The number of people involved in these discussions progressively expanded, with the Senior and Managing Partner co-opting an ever-increasing number of partners and management professionals into this secret process.After five months of repeated cycling and progressive co-option, the small group of eight who had originally embarked on the restructuring process had expanded to 50. Fifteen per cent of the partners were asked to leave or accept a reduction in their equity and all accepted the terms offered to them. The remaining 85 per cent of partners accepted that this decision had been made without any recourse to the partnership as a whole.As Professor Empson observed, "This suggests that it is possible for a leader with no constitutional authority to wield considerable power under the 'cloak of ambiguity'. It is perhaps not surprising that individual leaders may actively construct and celebrate this ambiguity if they are particularly skilled at navigating it effectively."She also pointed out that, "somewhat ironically", a plural model of leadership depends ultimately for its successful functioning on individual leaders. Though the individuals in the study would adamantly eschew the rhetoric of 'heroic' leadership, their colleagues are clear that the skills of these individuals were fundamental to the success of the initiative.As one Board Member reflected: "[The Senior Partner] managed to bring a tricky group of people to unity over the course of two months. The way he executed the delivery was exemplary. It was his finest hour."

What makes an effective leader in a professional service firm?

So what sort of leader can effectively negotiate their way through the ambiguities and social structures of a professional service firm? During the course of the research, Professor Empson has identified ten qualities that the most effective leaders share.

Highly respected for his or her skills as a professional

Does not appear to be seeking power

Able to inspire loyalty and commitment

Strong personal vision - able to communicate it

Able to build consensus and act decisively

Transfers responsibility but intervenes selectively

Comfortable with ambiguity and conflict

Spends a lot of time massaging egos

But does not expect to have his or her own ego massaged

And above all, the ability to identify and navigate the Leadership Constellation.

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